Fed's hawkish stance puts selling pressure on global stock markets in April

ISTANBUL (AA) – Faced with the hawkish stance of the US Federal Reserve, global stock markets upset their investors in April with the deepening selling pressure.

Diverging positively from global markets, Turkiye's benchmark stock index Borsa Istanbul, on the other hand, broke a monthly closing record with an increase of 8.83%.

Amid new COVID-19 measures in China and the Russia-Ukraine war, Fed's increasingly hawkish monetary policy to combat inflation, factors that increased the risk perception, and expectations that inflationary pressure will continue have accelerated the outflows from the bond markets in April.

The MSCI developed countries index decreased by 8.5%, displaying its worst performance since March 2020, while the MSCI developing countries index went down by 5.8%, the highest in the last nine months.

The decline in the Nasdaq index was recorded as the strongest monthly depreciation in the last 14 years, while the losses in the S&P 500 and Dow Jones indexes also pointed to the hardest selling pressure since March 2020.

According to the data released in the last week of April, the US economy surprisingly contracted by 1.4% in the first quarter, contrary to the annual growth expectations of 1.1%.

The expectation of at least a 50 basis points policy rate hike for the Fed's next four meetings in bond markets affected pricing in all assets.

The US' long-term bond rates rose to the highest level in the last three years and the dollar index to the highest in the last 20 years.

- Uncertainties may persist in May

Analysts said global inflation pressures continue to be effective, especially on commodity and food prices, and that the tightening policy stance of central banks may continue the pressure on the stock markets for the rest of the year.

Fed's decisions and guidance at its meeting in May will determine the direction of the markets and the Bank has not yet started to reduce the balance sheet, and that the effect of these steps on the liquidity in the markets is another important factor for the stock markets.

Analysts drew attention to the fact that the Fed's interest rate hike expectations at the June meeting varied between 50 and 75 basis points, saying markets may be more sensitive to the clues regarding the course of inflation in the macroeconomic data in May.

The European Central Bank has refrained from speaking the same language as the Fed and has not rushed for tightening monetary policy, limiting the pressures on European stock markets. Yet the ongoing war between Russia and Ukraine and the uncertainties stemming from the war cause the risk perception to remain high.

* Writing and contributions by Aysu Bicer in Ankara